May 14, 2018
The greatest public speaker I’ve ever seen was former Japanese Prime Minister Junichiro Koizumi. I watched him in 2005 as he gave a speech to a crowd outside a train station. He thundered, cajoled and generally mesmerized the assembled throng. This was all the more impressive given that the topic of his speech was something exceedingly boring. The snap election that was the occasion for Koizumi’s stump speech was focused on advancing a plan to turn Japan Post into several private companies owned by a private holding company.
Koizumi won his fight, his party crushing all opposition in a landslide, and his plan was set in motion, though the process has taken more than a decade. The company’s initial public offering in 2015 was the world’s biggest in that year. The government still owns most of Japan Post Holdings Co., and periodically sells off shares, with the goal of eventually reducing its stake to only a third from more than half now. But privatization hasn’t shrunk Japan’s postal bank itself, which remains one of the largest and most important in the world.
Why did Japan embark on this long and difficult road of privatization? And why did Koizumi win a landslide victory campaigning almost entirely on that promise? Japanese citizens didn’t seem particularly dissatisfied with the postal bank’s services — they were holding a quarter of their total wealth in the bank and its affiliated insurance company.
The problem was that Japan’s postal bank didn’t just take deposits — it also lent money, including to so-called zombie companies, or inefficient enterprises that survive due to below-market-rate loans. The presence of zombies creates unfair and destructive competition for efficient, profitable companies. When the lending is done by a government-owned bank, it can also be a vehicle for politicians to funnel money to their friends and supporters. The Japanese voters who propelled Koizumi to victory in 2005 were striking a blow against crony capitalism.
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